On today’s show we’re talking about the reversal of a two decade long trend in a matter of weeks. The question is, will the trend really reverse? Perhaps this is a short term reversal, to be followed by a continuation of the original trend. The trend we’re talking about is urban intensification. Most major cities stopped developing in the downtown core in in the 1960s. The suburbs began to sprawl and sprawl and sprawl. Farm land was gobbled up and replaced by nicely manicured streets with a single tree planted in front of each house. It would take another decade before the tree would look like a tree. That’s how you could tell the age of a neighborhood without looking at the houses. You only needed to look at the maturity of the trees.
The white two story houses of the 1950’s and 1960’s were replaced by more elaborate designs in the 1970’s and 1980’s. The new homes paid tribute to the two-income, two car desires of most households.
Between the suburbs and the downtown core most cities had a band of real estate that was neglected for nearly 30 years. These homes were built in the 1920’s through the 1940’s. It wasn’t trendy to remodel a historic home yet. They were just old and out of style.
But as the baby boomers have been retiring, they’ve been downsizing. They’ve been selling the four bedroom house in the suburbs and moving closer into town. They might be moving into a new condo, or perhaps into a new semi-detached house with a small rear yard and modern amenities like a roof deck. That band between the downtown core and the suburbs now has modern new construction town houses. These boomer buyers don’t want to mow the lawn and they don’t want to shovel the snow. The millennial buyers don’t seem to want the large houses in the suburbs either. It looked like the suburban home was going to become a dinosaur as tastes have changed.
Fast forward to 2020. We have a global pandemic on our hands. People are working from home and need more space for a home office. All of a sudden, that four bedroom house that looked too large is now the perfect house with two bedrooms and two offices where two people can be on a video conference call simultaneously without disturbing each other.
The lockdown situation meant that there were very few new houses listed for sale during the traditional Spring market. April inventory of houses for sale was the lowest on record.
We’ve seen a wave of new listings poised to hit the market in June. Perhaps this is the traditional Spring market, just delayed by a couple of months. For now, the inventory remains low and we are seeing bidding wars in a number of markets.
Major home builders have seen a wave of new contracts since the middle of May. Despite the major job losses, there are some sectors of the economy that seem to be booming. New home construction is setting up to be one of them.
Record low interest rates seem to be a contributing factor creating a large pent up demand. But there are so few homes for sale that would-be sellers are holding on. They could sell, but where would they move?
This was the same dilemma my wife and I faced earlier this year when we made the decision to sell our home. There were only 16 houses for sale in our area, a suburb of 200,000. Even through the lockdown, houses were selling above asking price in multiple offers with only a virtual tour and no open houses.
2020 is shaping up to be one of the busiest summers on record for real estate transactions.
